BILL NUMBER: SB 1967	CHAPTERED  09/19/00

	CHAPTER   508
	FILED WITH SECRETARY OF STATE   SEPTEMBER 19, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 17, 2000
	PASSED THE SENATE   AUGUST 25, 2000
	PASSED THE ASSEMBLY   JULY 6, 2000
	AMENDED IN ASSEMBLY   JUNE 29, 2000
	AMENDED IN ASSEMBLY   JUNE 14, 2000
	AMENDED IN SENATE   MAY 2, 2000

INTRODUCED BY   Senator Kelley

                        FEBRUARY 25, 2000

   An act to amend Section 17375 of, and to add Section 13401.3 to,
the Corporations Code, and to amend Sections 714, 720, 732, 733, and
739 of, and to add Section 729.5 to, the Harbors and Navigation Code,
relating to yacht and ship brokers.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 1967, Kelley.  Yacht and Ship Brokers Act.
   (1) Existing law regulates limited liability companies and
provides that nothing in that law is to be construed to permit a
domestic or foreign limited liability company to render professional
services, as defined.  Existing law defines "professional services,"
for that purpose, to mean any type of professional services that may
be lawfully rendered pursuant to a license, certification, or
registration authorized by the Business and Professions Code, or the
Chiropractic Act.
   This bill would include within the definition of "professional
services" for that purpose any type of professional services that may
be lawfully rendered under the Yacht and Ship Brokers Act.
   (2) The existing Yacht and Ship Brokers Act authorizes the
Department of Boating and Waterways to require the proof that it
deems advisable concerning the honesty, truthfulness, and good
reputation of the applicant for a yacht broker's license or of the
officers of any corporation making application before the issuance of
the license.  Existing law requires a licensed broker who accepts
funds from others to deposit those funds into a neutral escrow
depository.
   This bill would also authorize the department to require that
proof concerning each applicant for a salesperson's license.
   The bill would require any limited liability company licensed by
the department as a yacht broker on July 1, 2001, in order to
continue to be licensed after that date, to apply to the department
as an individual, partnership, or corporation for a broker's license
on or before the expiration date of its existing license.  The bill
would require the department, by February 1, 2001, to provide notice
of this requirement to any limited liability company licensed by the
department.
   The bill would expand the conditions for which the department may
deny an application or suspend or revoke the licenses of a broker or
salesperson.
   This bill would also permit a consent to use funds in escrow for a
purpose other than that specified in the written instructions to be
given the yacht broker by a facsimile.
   (3) Existing law requires that every civil action brought under
the act be brought by the Attorney General.
   This bill would authorize administrative actions to be brought
under the act and to be brought through the Office of Administrative
Hearings.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 13401.3 is added to the Corporations Code, to
read:
   13401.3.  As used in this part, "professional services" also means
any type of professional services that may be lawfully rendered only
pursuant to a license, certification, or registration authorized by
the Yacht and Ship Brokers Act (Article 2 (commencing with Section
700) of Chapter 5 of Division 3 of the Harbors and Navigations Code).

  SEC. 1.5.  Section 17375 of the Corporations Code is amended to
read:
   17375.  Nothing in this title shall be construed to permit a
domestic or foreign limited liability company to render professional
services, as defined in subdivision (a) of Section 13401 and in
Section 13401.3, in this state.
  SEC. 2.  Section 714 of the Harbors and Navigation Code is amended
to read:
   714.  A licensed broker who accepts funds from others in
connection with any transaction subject to this article who does not,
as soon as possible, place  those funds into a neutral escrow
depository, shall place the funds into a trust fund account
maintained by the broker in some bank or recognized depository and
shall retain all the funds in the account until the broker makes a
disbursement of the funds in accordance with written instructions
from the  person entrusting the money.  The written instructions
shall also set forth the specific purposes for which the broker may
use money deposited with him or her.  If the broker wishes to use
money from the deposit for a purpose not included in the written
instructions, the broker shall first obtain the written consent of
the person entrusting the money specifically authorizing the use
proposed by the broker for the money.  The written consent may be
given to the broker by a letter or facsimile.  A separate record
shall be maintained of all moneys received subject to this section
and shall further indicate the disposition thereof.  Any funds
received by a licensed salesperson shall be delivered by the
salesperson to the broker under whom the salesperson is at the time
licensed.
   As used in this section, "neutral escrow" means an escrow business
conducted by a person licensed under Division 6 (commencing with
Section 17000) of the Financial Code or by any person described by
subdivision (a) or (c) of Section 17006 of the Financial Code.
  SEC. 2.5.  Section 720 of the Harbors and Navigation Code is
amended to read:
   720.  The department may require proof as it deems advisable
concerning the honesty, truthfulness, and good reputation of the
applicant for a broker's or salesperson's license or of the officers
of any corporation making application before the issuance of a broker'
s license.  For this purpose, the director may call a hearing in
accordance with this article, and at the request of the applicant
shall call a hearing.
  SEC. 3.  Section 729.5 is added to the Harbors and Navigation Code,
to read:
   729.5.  (a) Any limited liability company licensed by the
department as a yacht broker on July 1, 2001, in order to continue to
be licensed after that date, shall apply to the department in the
form of an individual, partnership, or corporation for a broker's
license on or before the expiration date of its existing license.
   (b) On or before February 1, 2001, the department shall provide
notice of the requirements imposed by subdivision (a) to any limited
liability company licensed by the department.
  SEC. 4.  Section 732 of the Harbors and Navigation Code is amended
to read:
   732.  The department may deny an application or temporarily
suspend or permanently revoke the license of a broker or a
salesperson at any time if the licensee, while a broker or
salesperson, in performing or attempting to perform any of the acts
within the scope of this article, has committed any of the following
acts:
   (a) Makes any substantial misrepresentation, including a false
advertisement or an omission of relevant facts upon which any person
has relied.
   (b) Makes a false warranty of a character likely to influence,
persuade, or induce any person with whom business is transacted under
this article.
   (c) Engages in a continued and flagrant course of
misrepresentation or makes false warranties whether or not relied
upon by another person.
   (d) Acts for the buyer and seller in a transaction  without full
disclosure of that fact to the buyer and seller and their written
consent, except in the case where the selling broker is not the
listing broker.
   (e) Commingles the money or other property of his or her principal
with that of his or her own or uses it for any purpose other than
that for which it was entrusted, when the yacht involved in the
transaction is not his or her own.
   (f) Disburses or uses entrusted money for purposes other than
those specifically authorized by Section 714.
   (g) Uses coercive or oppressive methods for the purpose of
obtaining business or of procuring a listing or participating in a
transaction.
   (h) Quotes prices different from the gross listing prices without
the consent of the seller.
   (i) Engages in any other conduct constituting fraud or dishonest
dealings, either with respect to his or her principal or other
persons.
   (j) Permits his or her name to be used for the purpose of
assisting any person who is not a licensed broker or salesperson to
evade this article.
   (k) Demonstrates negligence or incompetence in performing any act
for which he or she is required to hold a license.
   (l) As a broker licensee, fails to exercise reasonable supervision
over the activities of his or her salespersons, or, as the person
designated by a corporate or partnership licensee, fails to exercise
reasonable supervision and control over the activities of the
corporation or partnership for which a yacht and ship broker's
license is required.
   (m) Fails to act in accordance with, or disregards, his or her
fiduciary duty toward a principal.
   (n) Violates any provisions of Section 708, 712, 714, 715, 716,
730, or 731, or the rules and regulations of the department
implementing this article.
  SEC. 5.  Section 733 of the Harbors and Navigation Code is amended
to read:
   733.  The department may deny an application or may suspend or
revoke the license of a yacht broker or yacht salesperson who, within
four years immediately preceding, has committed any of the following
acts:
   (a) Has procured a license under this article for himself or
herself or another by fraud, misrepresentation, or deceit.
   (b) Has been convicted of a felony or any crime involving moral
turpitude.
   (c) Has withheld information from the department that he or she at
any time has been convicted of a felony or any crime involving moral
turpitude.
   (d) Knowingly authorizes, directs, connives, or aids in the
publication, advertisement, distribution, or circulation of any
material false statements or misrepresentation concerning his or her
business or any transaction under this article.
   (e) Has acted or conducted himself or herself in a manner that
would warrant the denial of his or her application for a broker's or
salesperson's license pursuant to Section 720.
  SEC. 6.  Section 739 of the Harbors and Navigation Code is amended
to read:
   739.  Any person who violates any provision of this article, or
any regulation adopted pursuant to this article, is liable for a
penalty in an amount not less than one hundred dollars ($100) and not
to exceed one thousand five hundred dollars ($1,500) for each
separate violation.  The penalties provided in this section are in
addition to the remedies or penalties available under all other laws
of this state.
   Every civil or administrative action brought under this article at
the request of the director shall be brought by the Attorney General
in the name of the people of the State of California, in any court
of competent jurisdiction, or through the Office of Administrative
Hearings pursuant to Section 737, except that, when the civil action
is to be filed in a small claims court, the director may bring the
action.
   The amount of penalty that is assessed pursuant to this section on
each count of violation shall be based upon the nature of the
violation and the seriousness of the effect of the violation upon the
implementation of the purposes and provisions of this article.  Any
sum that is recovered under this section shall be deposited in the
State Treasury to the credit of the Harbors and Watercraft Revolving
Fund.
